Jan 18, 2017 08:17 PM IST IST | Source: Moneycontrol.com

Budget 2017: VC, PEs seek clarity on capital gains tax on unlisted stocks

Alternative Investment Funds (AIFs) are also seeking uniformity among regulators, including SEBI, RBI, PFRDA and IRDA, on regulatoy provisions

Moneycontrol Bureau

Venture capital (VC) funds and Private Equity (PE) funds, a major source of capital for Indian entrepreneurs, are looking for tax breaks in the forthcoming Union Budget, including a clarification on tax treatment of capital gains on unlisted shares.

“Alternative Investment Funds (AIFs) including VC and PE funds are looking forward to clarity on taxation of gains on unlisted shares in the Union Budget. A clear picture on the treatment of capital gains is important,” Rajat Tandon, President, Indian Private Equity & Venture Capital Association (IVCA), told Moneycontrol.

Tandon said that there should be uniformity among regulators on treatment of AIFs and the regulatoy provisions. “It is important that all regulators including the RBI, PFRDA and IRDA to harmonise their circulars on AIFs with those issued by SEB. Among other things we are also looking forward to an extension of "pass-through" tax status to all AIF categories,” he said.

Alternate Investment Funds (AIFs) include VC, PE and other offshore funds, have invested more than USD 130 billion, with a GAGR 28 percent since 2001. “VC/PEs in India as an asset class has evolved over the past two decades. Today, the asset class is accepted more readily by Indian entrepreneurs as a source of strategic capital. In this class, investments made by foreign firms exceed that of domestic firms in the ratio of 4:1,” Tandon said.

Vikram Gupta, CEO & Managing Partner, IvyCap Ventures, is also looking forward to the Union Budget giving a push to venture capital investment. “We are hoping for more incentives for alternative investments funds through changes in taxation policies. The government should also encourage more Limited Partnerships (LPs) like Pension Funds to invest in Funds,” Gupta said.

Gupta pointed out private equity investments in India itself has touched a USD16.8 billion in 2015 (across 661 deals), 50 percent higher than the USD 11.2 billion (across 530 deals) invested during the previous year. The surge was led by continued mega investments in consumer targeting Internet & mobile services companies that accounted for almost USD5.3 billion or 31.5 percent of the investment pie during the year.
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